Workers at Ford, GM, and Jeep-maker Stellantis just got one step closer to striking as automaker union negotiations heat up

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  • The United Auto Workers union is negotiating new four-year contracts with Ford, GM, and Stellantis.

  • Talks between the Detroit 3 and the UAW come amid a backdrop of a strengthening labor movement.

  • Union members on Friday overwhelmingly approved a strike, should leaders call for one.

The United Auto Workers union is gearing up for a fight with Detroit's Big Three car companies this summer and fall — and isn't ruling out a possible strike.

The union said Friday that results are still being tallied, but so far 97% have voted in favor of authorizing one or more strikes against Stellantis, General Motors and Ford. Such votes are almost always approved by large margins.

Ford, GM, and Stellantis (the owner of Chrysler and Jeep) returned to the bargaining table in July to hash out a new four-year agreement with the UAW, which is under new leadership following a yearslong federal investigation into financial corruption. Their current contract expires on September 14.

The fate of about 150,000 union-represented workers at the Big Three hangs in the balance as the two sides hash out the future of work in an increasingly electrified industry that will likely see less and less internal-combustion engine production and more battery production.

The talks come amid the backdrop of a newly emboldened labor movement across the country, with several high-profile strikes and organizing pushes in the entertainment, food, and retail industries. UAW President Shawn Fain, who was elected by a narrow margin in March, is leaning into this labor movement, eschewing long-standing traditions like ceremonial handshakes with the automotive CEOs in favor of connecting with his members.

He's taken to Facebook Live in recent months to speak directly to his members, preparing them for a potential strike.

"We have to be able to do whatever we have to do if you want to have these gains. The companies aren't going to freely give it," Fain said in June.

President Joe Biden, who has promised to be the "most pro-union president," previously urged the UAW and Detroit car companies to come to a "fair agreement" that avoids plant closures and helps usher in a transition to a "clean energy economy."

"I want to be clear about where I stand. I'm asking all sides to work together to forge a fair agreement," Biden wrote in the White House statement. "The UAW helped create the American middle class and as we move forward in this transition to new technologies, the UAW deserves a contract that sustains the middle class."

Fain and the UAW have withheld endorsement for President Biden's re-election campaign over concerns about the administration's actions on electric vehicles. In a statement in May, Fain warned that the EV transition could become a "race to the bottom" for American workers, and urged politicians to "have our backs" before the union makes any commitments.

Escalating tactics at the UAW predate Fain. In 2019, at the height of the union's corruption scandal, the UAW initiated a 40-day strike at GM's more than 30 US factories. The work stoppage helped the union notch wins on wages and job security, even as the company won the ability to close several factories. In the end, GM lost some $3.6 billion due to the strike.

The union, which also covers workers in other industrial industries and some academic institutions, has also had high-profile work stoppages at John Deere in 2021 and the University of California in 2022. Fain has said he is not ruling out a strike in this round of talks, potentially at more than one company.

Electric vehicles will change things

This is the first round of negotiations between the Detroit car companies and the UAW in which electric vehicles will be front and center. EVs were an undercurrent in the 2019 negotiations, but since then the segment has grown exponentially and companies like Ford and GM have made firm commitments to build more EVs, which require less labor.

The car companies will be looking for more flexibility to respond to changes in demand for EVs, which is already creating headaches for companies like Ford. The UAW will be looking for assurances that their work will be protected even as it changes, and that wages will continue to improve even as the companies look to remain competitive with EV-makers like Tesla who use cheaper non-union labor.

Then there is the issue of powertrain production. At GM, an Ultium battery plant has taken the place of Lordstown Assembly, which closed after the 40-day strike in 2019. The labor force there joined the UAW in late 2022. GM on August 24 agreed to a 25% average pay increase for the roughly 1,100 workers there, CNBC reported.

Ford is building a new EV campus in Tennessee, which is not unionized. As the industry moves away from historically unionized engine production and toward new battery plants that have not yet been unionized, the topic of job security will be at the forefront of EV talks as the UAW is seeking top union wages at those factories.

Labor costs are small, but the only thing in the company's control

The cost of labor only accounts for roughly 5% of the cost of building a vehicle, but it's the only part of vehicle production costs that companies can exert control over. This small piece of the pie is going to be even more important for companies to control in the next four years as commodity costs become more difficult to predict.

The average labor costs for the Detroit Three heading into contract talks four years ago hovered between $55 and $60 per hour. After the agreements in 2019, the Center for Automotive Research forecasted labor cost increases between 13% and 20%. That average includes wages and benefits.

While it's unlikely that the companies will be able to bring these costs down, they will be looking for ways to keep them from going up too much. However, some estimates based on what the UAW has won outside the automotive industry in the last four years put potential increases in labor costs between 25% and 30% over the next four years.

Negotiations formally began at all three companies last week. The current contracts are set to expire September 14.

Correction: July 27, 2023 — An earlier version of this story incorrectly said workers at GM's Ultium plant were not represented by a Union. They joined the UAW in 2022. 

Read the original article on Business Insider